Many homeowners mistakenly believe that they cannot qualify for a refinance or benefit from one because they have a less than perfect credit history. The fact is I have hundreds of loan programs available for borrowers who have had credit difficulties. A mortgage professional such as myself can analyze your individual situation and advise you if changes in your mortgage situation would benefit you.Sometimes, all it takes is a little creative thinking for a loan to work. A good broker knows that not all people fit into a cookie cutter mold and that sometimes, you have to think outside of the box.
Most local banks will not deal with consumers with below average credit. This is one of many reasons that working with a mortgage broker can help you. Mortgage brokers have programs for below with excellent credit, less than perfect credit and downright bad credit. Not only do they have loans for all different credit types but they also have loans for all different income types. They can mix and match these types of loans together too. An example is if you were a self-employed individual and it was hard to document your income and your credit was below average, a mortgage broker may find the loan that suits you best is a sub-prime loan that will allow you to use bank statements as income documentation instead of W2's, tax returns and pay-stubs. Therefore, there are many choices available to consumers with less than perfect credit.
Use your new mortgage to build a better credit score! It's not easy, but making every mortgage payments on time for 24-36 months can help build higher credit scores. For this reason, many people will initially take a 2-year ARM or 3-year ARM, build a string payment history (and higher scores), then refinance into a lower, fixed rate mortgage. Managing credit properly requires persistence but allows you to save thousands of dollars in the long run.
Working with a broker means that you can often get approved for loans that you might not be able to otherwise. Most brokers work with as many as several hundred lenders, and have access to the loan programs from all of those lenders. This means that they can probably approve you for a loan, even with less than perfect credit.
Does your credit report contain errors? If so it could result in you over-paying on your next mortgage. Correcting mistaken accounts can take time so the process should be started as soon as you recognize the mistakes. Common mistakes are duplicate accounts, old accounts that have not been updated, or accounts that are marked "open" when in fact they have been paid and closed.
Refinancing with less than perfect credit typically comes with higher interest rates and substantial prepayment penalties. Borrowers should consider these "Subprime Loans" when they have FICO scores below 620.
